Neil Davies, Head of Trading at PlutusFX, looks again at Sterling:
UK Unemployment has fallen to just 5.6%, the lowest rate since July 2008 and the last jobless figure before the election. I’m sure the incumbent government won’t mind that. The number of unemployed dropped by 76,000 to 1.84 million in the three months to February. Furthermore economists expect the rate to continue to fall in coming months.
This helped sterling to strengthen, rising to GBP/USD 1.504 against a weaker Dollar and GBP/EUR 1.388, having had a good run up from a figure of 1.36 10 days ago
In addition to rising employment, average wages are also rising, at an annualised rate of 1.8%. With inflation sitting at zero, this is a real boost to consumer spending power.
The anomaly of low unemployment/inflation/interest rates therefore continues, or indeed is exacerbated by the latest set of number. It does beg the question that something has to give at some stage, but also underlines the fact that as the world become smaller, governments and individual countries are becoming less and less effective at controlling, or even influencing the direction in which prices will move and indeed where an economy will travel.
